Single Touch Payroll has now extended to all employers. Is your business ready?
For a couple of years now, there has been a great deal of talk about Single Touch Payroll (STP).
Single Touch Payroll was introduced on 1st July 2018 for all businesses with 20 or more employees. However, the law was recently passed to extend the Single Touch Payroll (STP) reporting requirements to all employers. This means that if your business employs less than 20 employees, you must start using Single Touch Payroll from 1 July 2019.
There are still elements of the STP rollout for smaller businesses that need to be defined by the ATO. But what is clear is that you need to be aware of what STP is and what it will mean for your business.
What is Single Touch Payroll?
Single Touch Payroll is a new payroll reporting system introduced by the ATO. This new reporting system requires all businesses to report their payroll data electronically to the ATO for each and every pay run. This means that your employees’ tax and super information needs to be reported to the ATO on or before each pay day.
Each time you prepare a pay run for your employees, the single touch payroll system sends the following information directly to the ATO from your payroll or accounting software:
- Employees’ name and tax file number
- Gross salary and wages paid
- PAYG withholding
- Super contribution information
This means that from 1 July 2019 your payroll or accounting software need to be STP enabled to communicate this information to the ATO.
The ATO has said that STP reporting will soon be extended to include certain salary sacrificed amounts.
When does Single Touch Payroll apply to my business?
For employers with 1-19 employees, Single Touch Payroll will commence as of 1st July 2019.
However, if you’re an employer with 20+ employees, Single Touch Payroll has been compulsory since 1st July 2018 and your business should already be compliant.
To determine if STP is already compulsory for your business, you were required to perform a headcount of the number of employees you had on your payroll as at 1st April 2018. It was essential that you counted each individual employee including full time, part time, casual and seasonal, overseas employees and emplyees absent or on leave (paid or unpaid).
Will I still need to issue PAYG Payment Summaries to my employees?
With the introduction of Single Touch Payroll (STP), you will no longer need to provide Payment Summaries to your employees for payments reported through STP. You’re also no longer required to provide the ATO with a Payment Summary Annual Report (PSAR) at the end of the financial year for payments reported through STP. Instead there’s a simple end-of-year process for finalising STP. This process simply sends a confirmation to the ATO that you have fully reported for the financial year and for each of your employees.
How do I report FBT, ETP and RESC?
Some businesses will have the need to report
- ETP (employment termination payments)
- RESC (reportable employer super contributions) and
- FBT (fringe benefits tax) obligations
ETP (employment termination payments) and RESC (reportable employer super contributions) are reported when you process and file your pay runs using STP.
All FBT (fringe benefits tax) obligations are reported when you finalise STP and year-end. However, payments that are not reported through STP, such as Employee share scheme (ESS), will still need to be reported on a Payment Summary.
Am I still required to report my wages and PAYG withholding on my BAS?
Yes, you will still be required to lodge your BAS as normal. However, from 2020 the ATO will pre-fill activity statement labels W1 and W2 for small to medium withholders using the information you report to the ATO through STP.
How will STP affect my employee super obligations?
Single Touch Payroll (STP) also means that you will be automatically reporting your employees’ super liability information to the ATO. The liability is the amount that you would normally provide to your employees on their payslip. Your employees’ super funds will then report to the ATO once you have paid the super amount to your employees’ chosen or default fund. It’s almost certain that the ATO will be using this information to monitor those employers who fail to meet their employee super obligations.
Each quarter there will be information available to you regarding your superannuation obligations so that you can easily make payment to the ATO clearing house or your independent provider.
What if I am not ready to start STP on 1 July 2019? How will I file part-year information?
We strongly recommend you begin using STP immediately. But we understand that this is not always possible. With STP, your accounting software will file the financial year-to-date payroll data. This means that you only have to start filing information from the date you opted into STP.
I’m a micro-employer, small employer, or a family business – does STP still apply to me?
The date that you are required to start using STP will depend on your circumstances. The ATO has categorised businesses in the following way:
- Micro employer: A micro-employer is an employer with 1-4 employees. If you have 1–4 employees and have limited digital capability, you may be eligible to report quarterly until June 2021 through a registered tax agent. Your eligibility will be subject to a number of factors relating to your current compliance and ATO debt status. Talk to us to find out how we can support you.
- Small employer: A small employer is an employer with 5-19 employees. You can start reporting any time up to 30 September 2019, if you start before this date you’ll be reporting on time, if not you’ll need to apply for a later start date. We recommend you start on 1 July 2019.
- Closely held payees: A family business with payees that are ‘not at arms length’ are referred to by the ATO as closely held payees. Closely held payees will have two options available to them for STP reporting.
- A business with 19 or less employees will not need to report closely held payees through STP in the 2019–20 financial year. However all other employees (arms-length employees) must be reported through STP from 1 July 2019
- From 1 July 2020 you will have the option to report closely held payees’ information quarterly through STP. This report will be due at the same time as your quarterly activity statement. You will need to notify the ATO that you will be reporting your closely held payees quarterly.
How does STP affect my employees?
As a result of Single Touch Payroll (STP), your employees will be able to view their year-to-date payment information at any time via ATO online services, which your employees will access through their myGov account. They will no longer be provided with a Payment Summary at the end of the financial year.
Although the ATO has granted small employers a grace period until 30 September 2019 to be submitting live payroll data via STP, we strongly recommend that you become STP ready. This will ensure you are familiar with the new system and avoid any fines or penalties for late compliance.
As experienced Accountants in Melton, we can help you with STP. Our team of Melton Accountants can help you select suitable STP payroll software and provide payroll software training if needed.
For further information or assistance in reviewing your payroll software solutions and processes to ensure you are ready for the 1 July 2019 deadline, please contact our team of accountants on (03) 9746 6479.